Covenants and Leases and Buying and Selling Stock Mitchell Energy and Development Corporation was one of the country's largest oil and gas produc- ers. It was purchased by Devon Energy in 2001. Some years ago, the notes to its financial statements reveal the existence of certain debt agreement restrictions on the level of consolidated stockholders' equity as well as on various asset-to-debt ratios: The bank credit agreements contain certain restrictions which, among other things, require consolidated stockholders' equity to be equal to at least $300,000,000 and require the maintenance of specified financial and oil and gas reserve and/or asset value to debt ratios. 1. Given the existence of the asset-to-debt covenants, is Mitchell more likely to be able to enter into operating leases or capital leases without violating the covenants? 2. If Mitchell Energy and Development had refused to agree to these conditions at the time of the debt issues, how would it have affected the market price of the debt they issued? 3. In May 2001, Mitchell issued 4.68 million additional shares at $53 per share. Give the journal entry to record the issue, assuming no par stock. 4. In August 2001, Devon Energy agreed to buy Mitchell Energy by giving each shareholder in Mitchell Energy $31 in cash and .585 shares of Devon Energy. Devon's shares were valued at $50.76. How much profit would an investor who bought 1,000 shares in May 2001 make when the merger was complete?